Markets to make a flat start of new series on mixed economic data

The Indian markets suffered sharp sell-off in the last session of the month and traders went for profit taking amid the expiry of November series derivative contracts and on data showing a widening fiscal deficit. Today, the start of the new month and the new series is likely to be flat on mixed global cues but some strength can appear in reaction to the GDP numbers for the second quarter ended September. Reversing a five-quarter slide and setting itself on course for revival GDP rose 6.3 per cent in the July-September period, compared with the three year low of 5.7 per cent growth in the April-June quarter and 7.5 per cent in the year earlier. Reacting to the GDP growth data, Finance Minister Arun Jaitley has said the impact of demonetization and GST is behind us and growth in coming quarters will be on upward trajectory. Traders however, will be a bit cautious with India’s fiscal deficit at the end of October hitting 96.1 per cent of the budget target for 2017-18 on account of lower revenues and increase in expenditure. The fiscal deficit was 79.3 per cent in the same period last year.  Also, the eight core sectors grew at a slower pace of 4.7% in October, chiefly due to subdued performance of cement, steel and refinery segments. There will be some buzz in the auto stocks as their sales numbers for the month of November will be announced.

The US markets moved higher in the last session and the Dow and the S&P 500 reached new record closing highs on optimism about the outlook for tax reform after Senate Republicans cleared a key procedural hurdle. The Asian markets have made a mixed start, as the U.S. tax bill encountered stumbling blocks. Japanese shares gave up the early gains that that briefly helped the Nikkei 225 to reclaim a 25-year high reached in November.

Back home, Indian equity markets truly depicted the choppiness of F&O expiry session on Thursday with key gauges ending the session with a cut of over a percentage point. After a cautious negative start, markets traded range-bound for most part of the session, but last hour sell off dragged key gauges below their crucial 33,200 (Sensex) and 10,250 (Nifty) levels. Sentiments remained dampened as traders remained on sidelines ahead of September quarter GDP data that will be announced later in the day, though it is expected that economic growth pace is likely to pick up in the three months ending in September, halting a five-quarter slide as businesses started to overcome teething troubles after the bumpy launch of a national sales tax. Selling got intensified in final hour of trade on report that India’s fiscal deficit at the end of October hit 96.1 percent of the budget estimate for 2017- 18, mainly due to lower revenue realisation and rise in expenditure. In absolute terms, the fiscal deficit -- the difference between expenditure and revenue -- was Rs 5.25 lakh crore during April-October of 2017-18. During the same period of 2016-17, the deficit stood at 79.3 percent of the target.  Sentiments also remained dampened with Chief Economic Advisor Arvind Subramanian’s statement that demonetization and GST rollout may have reinforced the growth deceleration that had already set in. He added that not just growth, but investment, credit, exports, industrial production they all started decelerating sometime in the second quarter last year. Traders also remained concerned with a foreign brokerage report enlightening that a prolonged bull market across stocks, bonds and credit has left a measure of average valuation at the highest since 1900, a condition that at some point is going to translate into pain for investors. The report added that all good things must come to an end and there will be a bear market, eventually. Traders paid no heed towards the report that India has moved up one place to the 68th spot on the Global Entrepreneurship Index of 2018, which is topped by the US. Traders also shrugged off Minister of State for Finance, Shiv Pratap Shukla’s statement that by March 2018, GST will become so simple that people will have no issues. Finally, the BSE Sensex tumbled 453.41 points or 1.35% to 33,149.35, while the CNX Nifty was down by 134.75 points or 1.30% to 10,226.55.